Senate heads toward showdown vote on student loans

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Senate heads toward showdown vote on student loans

WASHINGTON (AP) — The top Democrat in the Senate accused Republicans on Tuesday of caring more about the rich than about students as the chamber steamed toward a showdown over keeping student loan interest rates from doubling for 7.4 million students in July.

Firing back, the Senate Republican leader said Democrats were using the chamber to create campaign issues instead of addressing the nation’s problems.

The sharp exchange came shortly before senators were scheduled to vote on whether to begin debating a Democratic plan to extend today’s 3.4 percent interest rates on subsidized Stafford loans for another year. That effort was likely to fail, though there were hints the two sides might work out a procedural agreement that would let initial debate to proceed.

Without congressional action, those rates will grow to 6.8 percent, thanks to a 2007 law that gradually lowered those rates but expires on July 1.

Republicans say they favor freezing student loan interest rates but oppose how Democrats would finance the $6 billion bill: by raising Social Security and Medicare payroll taxes on high-earning stock holders of some privately owned corporations.

Senate Minority Leader Mitch McConnell, R-Ky., said Democrats were forcing that vote as “a way to drive a wedge between Republicans and a constituency that they’re looking to court ahead of November’s elections. That’s what today’s vote is all about for them.”

McConnell said the Senate “has ceased to be a place where problems are resolved. It’s become, instead, a place where Democrats produce campaign material.”

Republicans are demanding a vote on their own alternative. It would block the rate increase but pay for it by killing a preventive health fund created by President Barack Obama’s 2010 health care overhaul.

Neither party has enough votes to push its measure through the Senate by itself, meaning that ultimately a compromise plan for financing the measure will be needed.

With neither party eager to appear to be causing college students to bear higher costs, conventional wisdom is that eventually a compromise will be struck, but first the political posturing will have to play out.

Reid said he might be willing to allow a vote on the GOP bill. But he also criticized Republicans for opposing the Democratic plan. “They’re sending a clear message that they’d rather protect wealthy tax dodgers, and that’s what they are, than help promising students achieve their dreams of higher education,” said Senate Majority Leader Harry Reid, D-Nev.

Both leaders acknowledged that a bipartisan agreement on how to finance the legislation was needed for the effort to advance, but each dared the other to propose such a plan. “If they want some other way to pay for it, let’s take a look at that,” Reid said.

McConnell said Democrats should support the GOP proposal “or at the very least offer a bipartisan solution of their own.”

The fight over student loans has become a high-profile, symbolic tussle over which party wants to do more for Americans scrounging to get by at a time jobs are hard to find, and each side is happy to force the other to take embarrassing votes.

With both parties focused on this November’s presidential and congressional elections, it is no coincidence they each have chosen to pay for their bill with a favorite target that they believe speaks to their core voters: Democrats going after higher revenues from the rich, Republicans trying to punch a hole in Obama’s health care overhaul.

Subsidized Stafford loans are for low- and middle-income students. The higher rates, should they occur, would only affect students taking out new loans starting July 1.

The Education Department estimates 7.4 million students will borrow $31.6 billion in such loans in the year beginning July 1, averaging $4,226 for each student.

These loans generally are paid off over a decade or more after graduation. Allowing interest rates to double would cost the typical student about $1,000 over the life of the loan, the administration says.